Consumers stand to make a few gains from legislative session

Eileen Ambrose, The Baltimore Sun

Let's turn to baseball to sum up the Maryland legislative session's impact on consumers: It had a few singles but no home runs.

"We made a lot of progress on some really critical issues," says Marceline White, executive director of the Maryland Consumer Rights Coalition. "But there is a lot of work left to do and in some places we had some setbacks."

Last year's legislative session was strong on consumer protections, with Marylanders still reeling from the foreclosure crisis and weak economy, White says. Now that the economy is gradually improving, this year's legislative agenda on consumer issues was more modest, she says.

Still, some bills will appeal to consumers, especially one that would give parents a new tool to protect children from identity theft.

Of course, the bills need Gov. Martin O'Malley to sign them into law. With the possibility of a special session, the budget secretary has advised the governor to postpone signing any legislation that has fiscal consequences, spokeswoman Takirra Winfield says.

Still, advocates are optimistic the governor will sign these consumer-friendly bills:

Child credit protection Kids aren't supposed to have a credit report because they're too young to get loans and credit cards. But if someone steals their identity, the thief can open credit in their name and the crime might go undetected for years.

Under legislation that had wide support, Maryland would become the first state to allow a parent or guardian to create a credit report for a child and then immediately freeze it. This would prevent new creditors from seeing the report so they wouldn't extend credit to anyone using the child's information.

The legislation would take effect in January, giving the major credit reporting agencies time to gear up, says Steve Sakamoto-Wengel, deputy chief of Maryland's Consumer Protection Division.

If parents discover now that their youngster has a credit report, the reporting agencies have said they would freeze the report before the law takes effect, he says.

Early mediation Maryland law two years ago gave homeowners the right to request mediation by the state's Office of Administrative Hearings after a foreclosure case had been filed against them.

Under legislation passed this year, homeowners could opt for mediation before their problems reached the foreclosure stage. The lender or loan servicer, however, would have to agree to this.

Proponents say the measure would encourage problem-solving before homeowners' woes become too severe to be fixed. Early mediation also would save companies money.

"It's another step forward," says Anne Balcer Norton, deputy commissioner of the Office of the Commissioner of Financial Regulation.

The legislation also requires the office to come up with a best-practices checklist for mediation, which would spell out a homeowner's options and the consequences, Balcer Norton says.

"Most homeowners aren't represented in mediation," she says. "We want to level the playing field."

This legislation would take effect in October.

Tax relief on forgiven debt The housing crisis highlighted an onerous federal tax: If a lender forgave all or some of your mortgage debt, that relief was considered taxable income.

Given the rise in foreclosures, Uncle Sam cut troubled homeowners a break a few years ago by not taxing as much as $2 million of forgiven debt on primary residences. This tax break is set to disappear at the end of the year and it's unclear whether Congress will extend it.

Maryland lawmakers are offering state tax relief if the federal tax break isn't renewed. Maryland would not collect state income tax on up to $1 million of forgiven mortgage debt for singles, and up to $2 million for joint filers. This would apply for the 2013 tax year.

This is one of those bills with a fiscal impact — potentially costing the state at least $4.9 million in lost revenue — so the governor likely won't be rushing to sign it.

Rent-to-own disclosures Maryland hasn't updated its law on rent-to-own stores since 1989 and other states have stronger consumer protections, says White of the Maryland Consumer Rights Coalition.

A survey by the nonprofit group found that consumers who buy appliances from rent-to-own stores end up paying two to three times more than they would if they'd bought the product outright from a traditional retailer, she says.

White's group wanted stiffer consumer disclosures and a cap on the profit a rent-to-own store could make on a sale. She says the industry countered that the state shouldn't interfere in the marketplace.

The outcome, White says, is no cap and only modest consumer disclosure. This would take effect in October. White vows to take up the issue again next year.

Readers of this column might recall a practice by some insurers that requires customers to buy both auto and homeowner's policies from them if they want any coverage at all.

A bill was introduced to ban this so-called "forced bundling" before it gained momentum in Maryland. The legislation failed.

On the upside: An insurer that was considering "forced bundling" here has backed off.